Earnings reliability in this environment is very tricky with the coronavirus.

Interest rates are so low it has made the earnings/interest certainty of bonds look very expensive. Would you rather invest in Vanguard Australian Government Bond Index ETF (ASX: VGB) for a tiny return or go for shares?

I’d rather go for shares. But share prices are always going to be volatile, however earnings from some shares could be much more stable. But how much should investors pay for those earnings to be mostly stable?

Some defensive shares like APA Group (ASX: APA) and Ausnet Services Ltd (ASX: AST) offer potentially reliable earnings. But they’re priced highly for that safety. 

Shares like EML Payments Ltd (ASX: EML) and Pushpay Holdings Ltd (ASX: PPH) have the potential to generate strong returns over the future. But there are a broader range of potential outcomes for those riskier shares.

But it’s up to you decide how much risk you’re willing to take with your investing. Can you stomach earnings volatility, or perhaps earnings unpredictability? Getting the best results in investing will require taking on more risk.

Is there a way to reduce risk and still get good returns?

It’s okay if you don’t like taking on as much risk. Diversification can help reduce the risk of an individual holding. It’s why investments like Vanguard Australian Shares Index ETF (ASX: VAS) are so popular. It takes out some of the guesswork so that it becomes more about your mindset to hold through tough periods.

Obviously if you end up owning more than 30 individual shares yourself then you’re probably losing the advantage of investing in shares with your own portfolio. Is that smallest holding as good as your tenth (or better) idea? It might be a good idea to just focus on your best ideas. 

More reading

• Why Fortescue, Freedom Foods, Pushpay, & QBE shares are dropping lower
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Emerchants Limited. The Motley Fool Australia owns shares of and has recommended PUSHPAY FPO NZX. The Motley Fool Australia owns shares of APA Group. The Motley Fool Australia has recommended Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post How much should you pay for earnings reliability from shares? appeared first on Motley Fool Australia.

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The latest credit and debit card usage data is giving investors a new reason to feel bullish on the ASX retail sector.

Spending on cards issued by Commonwealth Bank of Australia (ASX: CBA) and Australia and New Zealand Banking GrpLtd (ASX: ANZ) have not only recovered from the COVID-19 blues but is ahead of what it was this time last year.

Charge it to the card

Card data from CBA is up 4% in the week to 22 May, while ANZ reported a 2.3% rise, according to the Australian Financial Review.

However, some of the increase in card use may be due to the growing popularity of tap and pay to limit infection transmission.

ANZ also pointed out that the spending surge may not mean actual growth in consumer spending but households dipping into their travel and holiday budgets to fund purchases.

Better than expected result

Regardless, the sharp rebound is an unexpected surprise as the shutdown of our economy to contain the coronavirus pandemic dealt a devastating blow to the consumer discretionary sector.

ANZ economist Adelaide Timbrell told the AFR that ANZ-observed retail spending is still stronger than what the bank expected before the full reopening of our economy.

Consumers in Western Australia are leading the spending charge with a 12% increase over the previous corresponding period (pcp), according to the ANZ data.

On the flipside, Victoria is the worst state as card spending dropped 5.5% pcp. This is probably because the state is the slowest to relax its lockdown rules.

Patchy results

The latest data adds to signs that the retail sector is turning the corner. Consumer discretionary stocks have enjoyed a re-rating in their share prices that was fuelled by better than expected trading updates from retailers like City Chic Collective Ltd (ASX: CCX), Baby Bunting Group Ltd (ASX: BBN) and JB Hi-Fi Limited (ASX: JBH).

But not all consumer facing stocks are benefiting from the spending recovery. Travel and entertainment spending have collapsed due to the coronavirus.

This means we will have to wait a while before Sydney Airport Holdings Pty Ltd (ASX: SYD) and Flight Centre Travel Group Ltd (ASX: FLT) enjoy a rebound in revenue.

Also, retailers who cater to tourists and overseas students won’t be feeling the love from the latest card data.

International travel came to a near complete halt amid the outbreak and will be among the last sectors to recover from the COVID-19 fallout.

More reading

• Why ANZ, CBA, NAB, and Westpac shares are storming higher today
• The latest ASX shares that brokers have just upgraded to “buy”
• Why these 3 ASX 200 tech shares offer great value
• Up over 100% in 2 months. Are Nearmap shares still a buy at current prices?
• How to pick better shares and earn better returns

Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited and Commonwealth Bank of Australia. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Latest spending data could drive the ASX retail sector higher appeared first on Motley Fool Australia.

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